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Bassett Furniture Industries Inc. – ‘10-K’ for 11/28/20

On:  Thursday, 1/21/21, at 9:40am ET   ·   For:  11/28/20   ·   Accession #:  1437749-21-971   ·   File #:  0-00209

Previous ‘10-K’:  ‘10-K’ on 1/23/20 for 11/30/19   ·   Next:  ‘10-K’ on 1/31/22 for 11/27/21   ·   Latest:  ‘10-K’ on 1/25/24 for 11/25/23   ·   11 References:   By:  Bassett Furniture Industries Inc. – ‘S-8’ on 3/10/21 To:  Bassett Furniture Industries Inc. – ‘8-K’ on 1/19/21 for 1/13/21 To:  Bassett Furniture Industries Inc. – ‘10-Q’ on 7/9/20 for 5/30/20 To:  Bassett Furniture Industries Inc. – Previous ‘10-K’ on 1/23/20 for 11/30/19 To:  Bassett Furniture Industries Inc. – ‘8-K’ on 5/5/17 for 5/1/17 To:  Bassett Furniture Industries Inc. – ‘DEF 14A’ on 2/8/16 for 3/9/16 To:  Bassett Furniture Industries Inc. – ‘10-Q’ on 7/2/14 for 5/31/14 To:  Bassett Furniture Industries Inc. – ‘10-Q’ on 4/3/14 for 3/1/14 To:  Bassett Furniture Industries Inc. – ‘10-K’ on 1/23/14 for 11/30/13 To:  Bassett Furniture Industries Inc. – ‘10-K’ on 1/30/06 for 11/26/05 To:  Bassett Furniture Industries Inc. – ‘10-K’ on 3/2/98 for 11/30/97 

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  As Of               Filer                 Filing    For·On·As Docs:Size             Issuer                      Filing Agent

 1/21/21  Bassett Furniture Industries Inc. 10-K       11/28/20  114:11M                                    RDG Filings/FA

Document/Exhibit                   Description                      Pages   Size 

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                (Loss)                                                           
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25: R12         Note 4 - Financial Instruments, Investments and     HTML     40K 
                Fair Value Measurements                                          
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                Accounts                                                         
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                (Tables)                                                         
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                (Tables)                                                         
50: R37         Note 11 - Accumulated Other Comprehensive Loss      HTML     41K 
                (Tables)                                                         
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                (Tables)                                                         
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                Accounts (Tables)                                                
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                Textual)                                                         
60: R47         Note 2 - Significant Accounting Policies -          HTML     38K 
                Aggregate Exposure from Receivables and Guarantees               
                Related to Customers (Details)                                   
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                (Details)                                                        
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                Identifiable Intangible Assets (Details)                         
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                Fair Value Measurements (Details Textual)                        
65: R52         Note 5 - Accounts Receivable - Accounts Receivable  HTML     36K 
                (Details)                                                        
66: R53         Note 5 - Accounts Receivable - Activity in          HTML     36K 
                Allowance for Doubtful Accounts (Details)                        
67: R54         Note 6 - Inventories (Details Textual)              HTML     30K 
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69: R56         Note 6 - Inventories - Activity in Reserves for     HTML     44K 
                Excess Quantities and Obsolete Inventory by                      
                Segment (Details)                                                
70: R57         Note 7 - Property and Equipment (Details Textual)   HTML     35K 
71: R58         Note 7 - Property and Equipment - Property and      HTML     44K 
                Equipment (Details)                                              
72: R59         Note 7 - Property and Equipment - Summary of        HTML     37K 
                Reportable Segment Property and Equipment                        
                (Details)                                                        
73: R60         Note 7 - Property and Equipment - Depreciation      HTML     41K 
                Expense (Details)                                                
74: R61         Note 8 - Goodwill and Other Intangible Assets       HTML     40K 
                (Details Textual)                                                
75: R62         Note 8 - Goodwill and Other Intangible Assets -     HTML     48K 
                Goodwill and Other Intangible Assets (Details)                   
76: R63         Note 8 - Goodwill and Other Intangible Assets -     HTML     44K 
                Changes in Carrying Amount of Goodwill by                        
                Reportable Segment (Details)                                     
77: R64         Note 8 - Goodwill and Other Intangible Assets -     HTML     37K 
                Useful Lives and Remaining Amortization Period of                
                Goodwill and Other Intangible Assets (Details)                   
78: R65         Note 8 - Goodwill and Other Intangible Assets -     HTML     45K 
                Estimated Future Amortization Expense for                        
                Intangible Assets (Details)                                      
79: R66         Note 9 - Bank Credit Facility (Details Textual)     HTML     49K 
80: R67         Note 10 - Post-employment Benefit Obligations       HTML     83K 
                (Details Textual)                                                
81: R68         Note 10 - Post-employment Benefit Obligations -     HTML     67K 
                Plan Summary (Details)                                           
82: R69         Note 10 - Post-employment Benefit Obligations -     HTML     66K 
                Components of Net Periodic Pension Cost (Details)                
83: R70         Note 10 - Post-employment Benefit Obligations -     HTML     36K 
                Amounts Expected to be Recognized in Next Fiscal                 
                Year (Details)                                                   
84: R71         Note 11 - Accumulated Other Comprehensive Loss -    HTML     43K 
                Activity in Accumulated Other Comprehensive Loss                 
                (Details)                                                        
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                (Details Textual)                                                
86: R73         Note 12 - Capital Stock and Stock Compensation -    HTML     33K 
                Compensation Expense Related to Restricted Stock                 
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                Administrative Expenses (Details)                                
87: R74         Note 12 - Capital Stock and Stock Compensation -    HTML     49K 
                Changes in Outstanding Options (Details)                         
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                Additional Information Regarding Activity in Stock               
                Options (Details)                                                
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                Changes in Non-vested Options (Details)                          
90: R77         Note 12 - Capital Stock and Stock Compensation -    HTML     42K 
                Restricted Stock Awards (Details)                                
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                Provision (Benefit) (Details)                                    
93: R80         Note 13 - Income Taxes - Reconciliation of          HTML     48K 
                Statutory Federal Income Tax Rate and Effective                  
                Income Tax Rate (Details)                                        
94: R81         Note 13 - Income Taxes - Income Tax Effects of      HTML     64K 
                Temporary Differences and Carryforwards (Details)                
95: R82         Note 14 - Other Gains and Losses (Details Textual)  HTML     70K 
96: R83         Note 15 - Leases and Lease Guarantees (Details      HTML     51K 
                Textual)                                                         
97: R84         Note 15 - Leases and Lease Guarantees -             HTML     48K 
                Supplemental Balance Sheet Information (Details)                 
98: R85         Note 15 - Leases and Lease Guarantees - Lease Cost  HTML     45K 
                (Details)                                                        
99: R86         Note 15 - Leases and Lease Guarantees -             HTML     48K 
                Supplemental Lease Disclosures (Details)                         
100: R87         Note 15 - Leases and Lease Guarantees - Lease       HTML     68K  
                Maturities (Details)                                             
101: R88         Note 15 - Leases and Lease Guarantees - Minimum     HTML     44K  
                Future Rental Income (Details)                                   
102: R89         Note 16 - Contingencies (Details Textual)           HTML     31K  
103: R90         Note 17 - Earnings (Loss) Per Share -               HTML     62K  
                Reconciliation of Basic and Diluted Loss Per Share               
                (Details)                                                        
104: R91         Note 17 - Earnings (Loss) Per Share - Antidilutive  HTML     35K  
                Securities (Details)                                             
105: R92         Note 18 - Segment Information (Details Textual)     HTML     35K  
106: R93         Note 18 - Segment Information - Segment             HTML     96K  
                Information by Segment (Details)                                 
107: R94         Note 18 - Segment Information - Wholesale           HTML     59K  
                Shipments by Type (Details)                                      
108: R95         Note 19 - Quarterly Results of Operations (Details  HTML     49K  
                Textual)                                                         
109: R96         Note 19 - Quarterly Results of Operations -         HTML     71K  
                Quarterly Results of Operations (Details)                        
110: R97         Schedule II - Analysis of Valuation and Qualifying  HTML     45K  
                Accounts (Details)                                               
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As used herein, unless the context otherwise requires, “Bassett,” the “Company,” “we,” “us” and “our” refer to Bassett Furniture Industries, Incorporated and its subsidiaries. References to 2020, 2019, 2018, 2017 and 2016 mean the fiscal years ended November 28, 2020, November 30, 2019, November 24, 2018, November 25, 2017 and November 26, 2015. Please note that fiscal 2019 contained 53 weeks.

Safe-harbor, forward-looking statements

This report contains certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 with respect to the financial condition, results of operations and business of Bassett Furniture Industries, Incorporated and subsidiaries. Such forward-looking statements are identified by use of forward-looking words such as “anticipates”, “believes”, “plans”, “estimates”, “expects”, “aimed” and “intends” or words or phrases of similar expression. These forward-looking statements involve certain risks and uncertainties. No assurance can be given that any such matters will be realized. Important factors, which should be read in conjunction with Item 1A “Risk Factors”, that could cause actual results to differ materially from those contemplated by such forward-looking statements include:

You should keep in mind that any forward-looking statement made by us in this report speaks only as of the date on which such forward-looking statement is made. New risks and uncertainties arise from time to time, and it is impossible for us to predict these events or how they may affect us. We have no duty to, and do not intend to, update or revise the forward-looking statements in this report after the date hereof, except as may be required by law. In light of these risks and uncertainties, you should keep in mind that the events described in any forward-looking statement made in this report, might not occur.

PART I

(dollar amounts in thousands except per share data)

General

Bassett is a leading retailer, manufacturer and marketer of branded home furnishings. Our products are sold primarily through a network of Company-owned and licensee-owned branded stores under the Bassett Home Furnishings (“BHF”) name, with additional distribution through other wholesale channels including multi-line furniture stores, many of which feature Bassett galleries or design centers. We were founded in 1902 and incorporated under the laws of Virginia in 1930. Our rich 118-year history has instilled the principles of quality, value, and integrity in everything we do, while simultaneously providing us with the expertise to respond to ever-changing consumer tastes and meet the demands of a global economy.

With 97 BHF stores at November 28, 2020, we have leveraged our strong brand name in furniture into a network of Company-owned and licensed stores that focus on providing consumers with a friendly environment for buying furniture and accessories.  Our store program is designed to provide a single source home furnishings retail store that provides a unique combination of stylish, quality furniture and accessories with a high level of customer service.  In order to reach markets that cannot be effectively served by our retail store network, we also distribute our products through other wholesale channels including multi-line furniture stores, many of which feature Bassett galleries or design centers. We use a network of over 30 independent sales representatives who have stated geographical territories. These sales representatives are compensated based on a standard commission rate. We believe this blended strategy provides us the greatest ability to effectively distribute our products throughout the United States and ultimately gain market share.  

The BHF stores feature custom order furniture, free in-home and virtual design visits (“home makeovers”) and coordinated decorating accessories.  Our philosophy is based on building strong long-term relationships with each customer.  Sales people are referred to as “Design Consultants” and are trained to evaluate customer needs and provide comprehensive solutions for their home decor.  Until a rigorous training and design certification program is completed, Design Consultants are not authorized to perform in-home or virtual design services for our customers.

We have factories in Newton, North Carolina that manufacture custom upholstered and outdoor furniture. We also have factories in Martinsville and Bassett, Virginia that assemble and finish our custom dining offerings, including our “Bench Made” line of solid hardwood furniture. Our manufacturing team takes great pride in the breadth of its options, the precision of its craftsmanship, and the speed of its manufacturing process. Our logistics team then promptly ships the product to one of our home delivery hubs or to a location specified by our licensees.  In addition to the furniture that we manufacture domestically, we source most of our formal bedroom and dining room furniture (casegoods) and certain leather upholstery offerings from several foreign plants, primarily in Vietnam, Thailand and China. Over 75% of the products we currently sell are manufactured in the United States.

We also own Zenith Freight Lines, LLC (“Zenith”) which provides logistical services to Bassett along with other furniture manufacturers and retailers. Zenith delivers best-of-class shipping and logistical support services that are uniquely tailored to the needs of Bassett and the furniture industry. Approximately 60% of Zenith’s revenue is generated from services provided to non-Bassett customers.

On December 21, 2017, we purchased certain assets and assumed certain liabilities of Lane Venture from Heritage Home Group, LLC for $15,556 in cash. Lane Venture is a manufacturer and distributor of premium outdoor furniture and is now being operated as a component of our wholesale segment. This acquisition marked our entry into the market for outdoor furniture and we believe that Lane Venture has provided a foundation for us to become a significant participant in this category. Our strategy is to distribute this brand outside of our BHF store network only. See Note 3 to our consolidated financial statements for additional details regarding this acquisition.

With the knowledge we have gained through operating Lane Venture, we have developed the Bassett Outdoor brand that is only marketed through the BHF store network. This allows Bassett branded product to move from inside the home to outside the home to capitalize on the growing trend of outdoor living.

Impact of the COVID-19 Pandemic Upon Our Business

On March 11, 2020, the World Health Organization declared the current COVID-19 outbreak to be a global pandemic. In response to this declaration and the rapid spread of COVID-19 within the United States, federal, state and local governments throughout the country imposed varying degrees of restrictions on social and commercial activity to promote social distancing in an effort to slow the spread of the illness. These measures have had a significant adverse impact upon many sectors of the economy, including non-essential retail commerce. 

In response to the above and for the protection of our employees and customers, we temporarily closed our dedicated BHF stores, our manufacturing locations and many of our warehouses for several weeks primarily during the second fiscal quarter of 2020. We also implemented several operating changes which allowed us to maintain sufficient liquidity until we and other furniture retailers were able to reopen for business. These included, among other things, an approximate 23% permanent workforce reduction, temporary salary and wage reductions for all remaining employees, including a 50% pay reduction for our chief executive officer and certain other executives, negotiations with our landlords to receive abatements of rent, and in some cases, temporary rent deferrals, on many of our store leases and the amendment of our bank credit agreement to provide an additional $25,000 of availability under our credit line through December 31, 2020. The disruption to our operations caused by the COVID-19 pandemic resulted in a significant loss for the second quarter of fiscal 2020 which drove the loss for the full year despite our return to profitability during the third and fourth fiscal quarters.

However, since restarting our manufacturing operations and reopening stores beginning in late May of 2020, the pace of incoming wholesale orders from both the retail stores and our independent dealers outside the BHF store network have far exceeded our post reopening forecasts. Wholesale orders for the second half of 2020 increased 26% as compared to 2019. While our manufacturing operations, primarily our upholstery division, and shipping operations have not been able to keep pace with the incoming order level, we were able to generate net income of $8,782 and operating cash flow of $42,422 during the second half of fiscal 2020. As a result, we have restored all temporarily reduced salaries and wages and resumed the payment of quarterly dividends, including the payment of the dividend declared and subsequently suspended during the second quarter, as well as the declaration and payment of a special dividend subsequent to November 28, 2020.

We continue to closely monitor the COVID-19 pandemic and the potential effects on the economy, the consumer and our business. While the rate of incoming orders at both our wholesale and retail segments is currently strong, there are continuing logistical challenges faced by us and the entire home furnishings industry resulting from COVID-related labor shortages and supply chain disruptions creating significant delays in order fulfillment and increasing backlogs. Although unable to predict with certainty, we expect gradual decreases in wholesale and retail backlogs over the course of 2021 driven by an anticipated lower rate of future incoming orders coupled with increased manufacturing and shipping activity. While the home furnishings industry has fared much better during the pandemic than other sectors of the economy, continued economic weakness and the recent surge in COVID-19 cases coupled with the slow rollout of vaccinations may eventually have an additional adverse impact upon our business. The timing of any future actions by us in response to COVID-19 is largely dependent on the mitigation of the spread of the virus, the speed with which vaccinations are disseminated, status of government orders, directives and guidelines, recovery of the business environment, economic conditions, and consumer demand for our products.

Operating Segments

We have strategically aligned our business into three reportable segments: Wholesale, Retail – Company-owned stores, and Logistical Services.

The wholesale home furnishings segment is involved principally in the design, manufacture, sourcing, sale and distribution of furniture products to a network of BHF stores (Company-owned retail stores and licensee-owned stores) and independent furniture retailers. Our retail segment consists of 63 Company-owned and operated BHF stores. The following table shows the number of Company-owned stores by state as of November 28, 2020:

Our six locations in the state of New York include a 16,000 square foot clearance center in Middletown, New York. Unlike our other 62 BHF locations, the clearance center offers only clearance merchandise at reduced price points and without design consulting services.

Wholesale Segment Overview

The wholesale furniture industry is very competitive and there are a large number of manufacturers both within and outside the United States who compete in the market on the basis of product quality, price, style, delivery and service. Additionally, many retailers source imported product directly, thus bypassing domestic furniture manufacturers and wholesale importers. We believe that we can be successful in the current competitive environment because our products represent excellent value combining attractive prices, quality and styling, prompt delivery, and superior service.

Wholesale shipments by category for the last three fiscal years are summarized below:

Approximately 24% of our 2020 wholesale sales were of imported product compared to 23% and 27% in 2019 and 2018, respectively. We define imported product as fully finished product that is sourced. Our domestic product includes certain products that contain components which were also sourced. We continue to believe that a blended strategy including domestically produced products primarily of a custom-order nature combined with sourcing of major collections provides the best value and quality of products to our customers.

The dollar value of our wholesale backlog, representing orders received but not yet shipped to the BHF store network or independent dealers, was $54,874 at November 28, 2020 and $19,952 at November 30, 2019. We believe that the backlog will gradually decrease over the course of 2021 to a more manageable level as we do not believe the current pace of business is sustainable. 

We use lumber, fabric, leather, foam and other materials in the production of wood and upholstered furniture. These components are purchased from a variety of domestic and international suppliers and are widely available. The price and availability of foam, which is highly dependent on the cost of oil and available capacity of oil refineries, can be subject to significant volatility from time to time. We currently assemble and finish these components in our five manufacturing facilities in the United States.

Other Investments and Real Estate

Our balance sheet at November 28, 2020 and November 30, 2019 included short-term investments in certificates of deposit (“CDs”). At November 24, 2018, in addition to CDs, we also held investments in certain real estate related to former licensee-owned stores. The impact upon earnings arising from these investments is included in other loss, net, in our consolidated statements of operations. Our investment balances at each of the last three fiscal year-ends are as follows:

Our short-term investments at November 28, 2020 consist of CDs with original terms generally ranging from six to twelve months, bearing interest at rates ranging from 0.05% to 2.0% with a weighted average yield of approximately 0.21%. At November 28, 2020, the weighted average remaining time to maturity of the CDs was approximately four months. Each CD is placed with a federally insured financial institution and all deposits are within Federal deposit insurance limits.

Prior to November 30, 2019, we held investments in retail store properties that we had previously leased to licensees. In November of 2019, we sold one such property, which had a carrying value of $1,655 at November 24, 2018, to the lessee for net proceeds of $1,475. At November 30, 2019, our only remaining investment real estate consisted of a building subject to a ground lease which expired in 2020. During fiscal 2017, we fully impaired the carrying value of the building. See Item 2, Properties, for additional information about our retail real estate holdings.

Retail Segment Overview – Company-Owned Retail Stores

The retail furniture industry remains very competitive and includes local furniture stores, regional furniture retailers, national department and chain stores, single-vendor branded retailers and on-line retailers. As a whole, our store network with 63 Company-owned stores and 34 licensee-owned stores, ranks in the top 30 in retail furniture sales in the United States. Our Company-owned store network peaked at 70 stores in fiscal 2019. Since that time, we have closed seven underperforming locations and have no current plans to open additional locations.

Net sales for our Company-owned retail stores for the last three fiscal years are summarized below:

The COVID crisis has given us the opportunity to look inward and to begin making structural improvements to our business model. We instituted a “virtual appointment” program for our stores in late March, whereby consumers digitally engage with our designers and transact without physically visiting a store. Adding this new form of engagement is one of the many lasting changes that will come out of the 2020 pandemic.

We consider our website to be the front door to our brand experience where customers can research our furniture and accessory offerings and subsequently buy online or engage with an in-store design consultant. Customer acquisition resulting from our digital outreach strategies increased our traffic to the website by 82% and web orders by 92% for the fourth quarter of fiscal 2020 as compared to 2019. Digital advertising dominated our marketing expenditures for the majority of the year as we chose to spend less in traditional television and direct mail advertising. We plan to continue with increased levels of spending on digital advertising and outreach during 2021. We also expect to continue investing in our website to improve the navigation and the ordering capabilities to increase web sales. Much of our current product offerings highlight the breadth and depth of our custom furniture capabilities which are difficult to show and sell online. We plan to expand our merchandising strategies to include more product that can be more easily purchased online with or without a store visit. While we work to increase web sales, we will not compromise on our in-store experience or the quality of our in-home makeover capabilities.

We also continue to re-examine the performance of every one of our stores. Store traffic has been declining for three years and the effect on our retail model has become increasingly challenging. We believe that on a market-by-market basis, there will be fewer stores in the future and that they will operate with a leaner structure. As a result, our retail management team implemented a new retail staffing model that includes fewer designers, less administrative staff, and a smaller field management organization. We will continue to evaluate store-by-store performance as we seek the optimal store count in the markets in which we compete at retail. We believe the seismic shift in shopping behavior which has been tremendously accelerated by closures of brick and mortar stores as a result of COVID-19 will ultimately result in more favorable retail rent structures.

The migration to digital brand research and compressed transaction cycles have caused us to comprehensively evaluate all of our American made custom products. While our Custom Upholstery, Custom Dining, and Bench Made product lines continue to be our most successful offerings, they are not conducive to web transactions; most of these items must be purchased in a store. Furthermore, we offer many upholstery trim options, fabrics and finishes that have low rates of sale and that make web navigation more difficult for the consumer. Consequently, we will continue to methodically re-design each one of these important lines. Our intent is to continue to offer the consumer custom options that will help them personalize their home but to do so in an edited fashion that will provide a better web experience in the research phase and will also allow the final purchase to be made either on the web or in the store. We also plan to heavily emphasize our “Made in America” story and utilize locally harvested and organic materials when possible. While this will all take time to complete, new products began appearing on the retail floors and website in early 2021. 

Logistical Services Segment Overview

Zenith is a specialized supply chain solutions provider, offering the home furnishings industry the benefit of an asset-based network to move product with greater efficiency, enhanced speed to market, less damage and a single source of shipment visibility. We provide fully integrated solutions with the highest commitment to customer care and service as we seek to go beyond our customers’ transactional expectations to create collaborative partnerships that provide a single source network to:

Our customer solutions are provided through the following services:

At November 28, 2020, our shipping and delivery fleet consisted of the following:

We own a central warehousing and national distribution hub located in Conover, North Carolina, and we lease eleven facilities in ten states across the continental United States from which we operate regional freight terminals and provide warehouse and distribution services.

Trademarks

Our trademarks, including “Bassett” and the names of some of our marketing divisions, products and collections, are significant to the conduct of our business. This is important due to consumer recognition of the names and identification with our broad range of products. Certain of our trademarks are licensed to independent retailers for use in full store and store gallery presentations of our products. We also own copyrights that are important in the conduct of our business.

Government Regulations

We believe that we have materially complied with all federal, state and local standards regarding safety, health and pollution and environmental controls.

Our logistical services segment is also subject to regulation by several federal governmental agencies, including the Department of Transportation (“DOT”). Specifically the Federal Motor Carrier Safety Administration and the Surface Transportation Board, which are agencies within the DOT. We are also subject to rules and regulations of various state agencies. These regulatory authorities have broad powers, generally governing matters such as authority to engage in motor carrier operations, motor carrier registration, driver hours of service, safety and fitness of transportation equipment and drivers and other matters.

We may also be affected by laws and regulations of countries from which we source goods. Labor, environmental and other laws and regulations change over time, especially in the developing countries from which we source. Changes in these areas of regulation could negatively impact the cost and availability of sourced goods. The timing and extent to which these regulations could have an adverse effect on our financial position or results of operations is difficult to predict. In addition, the imposition of new or increased duties, tariffs, retaliatory tariffs and trade limitations with respect to foreign-sourced products could negatively impact the cost of such goods. Based on the present facts, we do not believe that they will have a material adverse effect on our financial position or future results of operations.

People

We employed 2,071 people as of November 28, 2020. None of our employees are subject to collective bargaining arrangements and we have not experienced any recent work stoppages. We consider our relationship with our employees to be good. Headcount by segment is as follows:

We believe our employees are key to achieving our business objectives. In the early stages of the COVID-19 pandemic we experienced brief closures at most of our facilities, generally four weeks or less. Upon reopening, we had COVID-19 prevention protocols in place to minimize the spread of COVID-19 in our workplaces. These protocols, which remain in place, meet or exceed the Centers for Disease Control guidelines and where applicable, state mandates. Our employees were trained on these protocols prior to or upon returning to work.

Our key human capital measures include employee safety, turnover, absenteeism and production. We frequently benchmark our compensation practices and benefits programs against those of comparable industries and in the geographic areas where our facilities are located. We believe that our compensation and employee benefits are competitive and allow us to attract and retain skilled and unskilled labor throughout our organization. Our notable health, welfare and retirement benefits include:

We strive to maintain an inclusive environment free from discrimination of any kind, including sexual or other discriminatory harassment. Our employees have multiple avenues available through which inappropriate behavior can be reported, including a confidential hotline. All reports of inappropriate behavior are promptly investigated with appropriate action taken to stop such behavior.

Major Customers

Our risk exposure related to our customers, consisting primarily of trade accounts receivable along with certain guarantees, net of recognized reserves, totaled approximately $24,475 and $23,297 at November 28, 2020 and November 30, 2019, respectively. At November 28, 2020 and November 30, 2019, approximately 24% and 28%, respectively, of the aggregate risk exposure, net of reserves, was attributable to five customers. In fiscal 2020, 2019 and 2018, no customer accounted for more than 10% of total consolidated net sales. However, two customers accounted for approximately 29%, 44% and 40% of our consolidated revenue from logistical services during 2020, 2019 and 2018, respectively.

Available Information

We file our annual, quarterly and current reports, proxy statements and other information with the SEC. Our SEC filings are available to the public at the SEC’s website at www.sec.gov.

Through our website, www.bassettfurniture.com, we make available free of charge as soon as reasonably practicable after electronically filing or furnishing with the SEC, our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and any amendments thereto.

The following risk factors should be read carefully in connection with evaluating our business and the forward-looking information contained in this Annual Report on Form 10-K. The risk factors below represent what we believe are the known material risk factors with respect to us and our business. Any of the following risks could materially adversely affect our business, operations, industry, financial position or future financial results.

Risks Related to the Coronavirus Pandemic

The coronavirus global pandemic which caused a significant disruption in non-essential retail commerce may continue to have a material adverse impact upon our financial condition and results of operations.

On March 11, 2020, the World Health Organization declared the current coronavirus (“COVID-19”) outbreak to be a global pandemic. In response to this declaration and the rapid spread of COVID-19 within the United States, federal, state and local governments throughout the country imposed varying degrees of restriction on social and commercial activity to promote social distancing in an effort to slow the spread of the illness. These measures have had a significant adverse impact upon many sectors of the economy, including non-essential retail commerce. As a result of these circumstances, we temporarily closed our dedicated stores, our manufacturing locations and many of our warehouses. In addition, many of our office personnel were working remotely. By the end of June, we had reopened all of our retail stores that had been temporarily closed. However, continuing logistical challenges faced by the entire home furnishings industry resulting from COVID-related labor shortages and supply chain disruptions have created significant delays in order fulfillment and increasing backlogs as we have not been able to produce and ship at the incoming rate of wholesale and retail orders. Although unable to predict with certainty, we expect gradual decreases in wholesale and retail backlogs over the course of 2021 driven by an anticipated lower rate of future incoming orders coupled with increased manufacturing and shipping activity. If we are unable to reduce the backlogs and increase the speed of order fulfillment it is possible that some of our customers may begin to cancel existing orders and require refunds of deposits, which could have an adverse impact upon our liquidity and results of operations. While the home furnishings industry has fared much better during the pandemic than other sectors of the economy, continued economic weakness and the recent surge in COVID-19 cases coupled with the slow rollout of vaccinations may have an adverse impact upon our business. Furthermore, the economic recession brought on by the pandemic may eventually have an adverse impact on consumer demand for our products. Should these conditions persist for a prolonged period, this may have a continuing material adverse impact on our ultimate financial condition and liquidity.

Risks Related to Our Retail Operations

We face a volatile retail environment and changing economic conditions that may further adversely affect consumer demand and spending.

Historically, the home furnishings industry has been subject to cyclical variations in the general economy and to uncertainty regarding future economic prospects. Should the current economic recovery falter or the current recovery in housing starts stall, consumer confidence and demand for home furnishings could deteriorate which could adversely affect our business through its impact on the performance of our Company-owned stores, as well as our licensees and the ability of a number of them to meet their obligations to us.

Our retail stores face significant competition from national, regional and local retailers of home furnishings, including increasing on-line competition via the internet.

The retail market for home furnishings is highly fragmented and intensely competitive. We currently compete against a diverse group of retailers, including national department stores, regional or independent specialty stores, and dedicated franchises of furniture manufacturers. National mass merchants such as Costco also have limited product offerings. We also compete with retailers that market products through store catalogs and the internet. In addition, there are few barriers to entry into our current and contemplated markets, and new competitors may enter our current or future markets at any time. We have also seen increasing competition from retailers offering consumers the ability to purchase home furnishings via the internet for home delivery, and this trend is expected to continue. Our existing competitors or new entrants into our industry may use a number of different strategies to compete against us, including aggressive advertising, pricing and marketing, extension of credit to customers on terms more favorable than we offer, and expansion into markets where we currently operate.

Competition from any of these sources could cause us to lose market share, revenues and customers, increase expenditures or reduce prices, any of which could have a material adverse effect on our results of operations.

Our licensee-owned stores may not be able to meet their obligations to us.

We have a significant amount of accounts receivable attributable to our network of licensee-owned stores. We also guarantee some of the leases of some of our licensees. If these stores do not generate the necessary level of sales and profits, the licensees may not be able to fulfill their obligations to us resulting in additional bad debt expenses and real estate related losses.

Risks Related to Our Brand and Product Offerings

Failure to successfully anticipate or respond to changes in consumer tastes and trends in a timely manner could adversely impact our business, operating results and financial condition.

Sales of our furniture are dependent upon consumer acceptance of our designs, styles, quality and price. As with all retailers, our business is susceptible to changes in consumer tastes and trends. We attempt to monitor changes in consumer tastes and home design trends through attendance at international industry events and fashion shows, internal marketing research, and communication with our retailers and design consultants who provide valuable input on consumer tendencies. However, such tastes and trends can change rapidly and any delay or failure to anticipate or respond to changing consumer tastes and trends in a timely manner could adversely impact our business, operating results and financial condition.

In addition, certain suppliers may require extensive advance notice of our requirements in order to produce products in the quantities we desire. This long lead time may require us to place orders far in advance of the time when certain products will be offered for sale, thereby exposing us to risks relating to shifts in consumer demand and trends, and any downturn in the U.S. economy.

Our success depends upon our brand, marketing and advertising efforts and pricing strategies, and if we are not able to maintain and enhance our brand, or if we are not successful in these efforts and strategies, our business and operating results could be adversely affected. 

Maintaining and enhancing our brand is critical to our ability to expand our base of customers and drive increased traffic at both Company-owned and licensee-owned stores and to our website. Digital advertising and outreach dominated our marketing expenditures for the majority of fiscal 2020 as we chose to spend less in traditional television and direct mail advertising, and we plan to continue with increased levels of spending on digital advertising and outreach during 2021. We also expect to continue investing in our website to improve the navigation and the ordering capabilities to increase web sales. We cannot provide assurance that our marketing, advertising and other efforts to promote and maintain awareness of our brand will not require us to incur substantial costs. If these efforts are unsuccessful or we incur substantial costs in connection with these efforts, our business, operating results and financial condition could be adversely affected.

Risks Related to Material Sourcing and Supply

Our use of foreign sources of production for a portion of our products exposes us to certain additional risks associated with international operations.

Our use of foreign sources for the supply of certain of our products exposes us to risks associated with overseas sourcing.  These risks are related to government regulation, volatile ocean freight costs, delays in shipments, and extended lead time in ordering. Governments in the foreign countries where we source our products may change their laws, regulations and policies, including those related to tariffs and trade barriers, investments, taxation and exchange controls which could make it more difficult to service our customers resulting in an adverse effect on our earnings. We have experienced recent increases in ocean freight costs coupled with a lack of availability of shipping containers resulting in reduced flow of products primarily from Asia. Continued product delays and extended order lead times may adversely affect our ability to service our customers and respond to changes in demand, resulting in the purchase of excess inventory in the face of declining demand, or lost sales due to insufficient inventory in the face of increasing demand, either of which would also have an adverse effect on our earnings or liquidity.

Fluctuations in the price, availability and quality of raw materials could result in increased costs or cause production delays which might result in a decline in sales, either of which could adversely impact our earnings. 

We use various types of wood, foam, fibers, fabrics, leathers, and other raw materials in manufacturing our furniture. Certain of our raw materials, including fabrics, are purchased both abroad and domestically. Fluctuations in the price, availability and quality of raw materials could result in increased costs or a delay in manufacturing our products, which in turn could result in a delay in delivering products to our customers. For example, lumber prices fluctuate over time based on factors such as weather and demand, which in turn impact availability. Production delays or upward trends in raw material prices could result in lower sales or margins, thereby adversely impacting our earnings.

Risks Related to Our Logistical Services Operations

We may suffer adverse impacts from additional risks associated with the operations of Zenith, a freight transportation and logistics business.

Zenith exposes us to certain risks common to that business, including, but not limited to: difficulties attracting and retaining qualified drivers which could result in increases in driver compensation and could adversely affect our profitability and our ability to maintain or grow our fleet; adverse impacts from unfavorable fluctuations in the availability and price of diesel fuel; increased costs of compliance with, or liability for violation of, existing or future regulations in the highly regulated freight transportation industry; adverse impacts upon Zenith’s results of operations which may result from seasonal factors and harsh weather conditions; and the increased liability inherent with the operation of heavy over-the-road vehicles.

Risks Related to Electronic Data Processing and Digital Information

We rely extensively on computer systems to process transactions, summarize results and manage our business.  Disruptions in both our primary and back-up systems could adversely affect our business and operating results.

Our primary and back-up computer systems are subject to damage or interruption from power outages, computer and telecommunications failures, computer viruses, security breaches, natural disasters and errors by employees.  Though losses arising from some of these issues would be covered by insurance, interruptions of our critical business computer systems or failure of our back-up systems could reduce our sales or result in longer production times.  If our critical business computer systems or back-up systems are damaged or cease to function properly, we may have to make a significant investment to repair or replace them.

We may incur costs and reputational harm resulting from security risks we face in connection with our electronic processing, storage and transmission of confidential information.

We accept electronic payment cards in our stores and also gather certain personal identifiable information in the processing of our retail sales transactions. We also store and process confidential information pertaining to our employees and other third parties on our networks. We may in the future become subject to claims for purportedly fraudulent transactions arising out of the actual or alleged theft of credit or debit card information. In addition, if there were a disclosure of confidential information provided by, or concerning, our employees, customers or other third parties, including through inadvertent disclosure, unapproved dissemination, or unauthorized access, our reputation could be harmed and we could be subject to civil or criminal liability and regulatory actions. Proceedings related to theft of credit or debit card information may be brought by payment card providers, banks and credit unions that issue cards, cardholders (either individually or as part of a class action lawsuit) and federal and state regulators. Any such proceedings could distract our management from running our business and cause us to incur significant unplanned losses and expenses. Consumer perception of our brand could also be negatively affected by these events, which could further adversely affect our results and prospects.

None. 

General

We own our corporate office building, which includes an annex, located in Bassett, Va.

We own the following facilities, by segment:

Wholesale Segment:

In general, these facilities are suitable and are considered to be adequate for the continuing operations involved. All facilities are in regular use and provide adequate capacity for our manufacturing and warehousing needs. In addition to the owned properties shown above, we lease property in Newton, North Carolina for the manufacturing and warehousing operations of Lane Venture and Bassett Outdoor, and we lease a facility in Haleyville, Alabama which houses a production line for aluminum outdoor furniture. A former upholstery division manufacturing facility which occupied part of a regional distribution center in Grand Prairie, Texas that is leased by our logistical services segment was closed during the second quarter of fiscal 2020.

Retail Segment:

Real estate associated with our retail segment consists of eight owned locations with an aggregate square footage of 201,096 and a net book value of $17,845. These stores are located as follows:

Of these locations, two are subject to land leases. Our remaining 55 store locations are leased from third-parties. In addition to retail stores, we also lease twelve locations for use as regional warehouses and home delivery distribution centers.

Logistical Services Segment:

Owned real estate associated with our logistical services segment is located in Conover, North Carolina and includes the following facilities:

In addition to the owned facilities listed above, we also lease warehouse space in eleven locations across the United States with an aggregate square footage of 942,876.

See Note 15 to the Consolidated Financial Statements included under Item 8 of this Annual Report for more information with respect to our operating lease obligations.

None.  

Not applicable.  

INFORMATION ABOUT OUR EXECUTIVE OFFICERS 

David C. Baker, 60, joined the Company in 2005 as Director, Store Operations. From 2006 to 2015 he served as Vice President – Corporate Retail, and in 2015 was appointed to Senior Vice President, Corporate Retail. In 2019, he was appointed Senior Vice President, Chief Retail Officer. Prior to joining Bassett, Mr. Baker managed Bassett stores for licensees from 1999 to 2005 after having previously managed stores for other furniture retail chains including Haverty’s and Rhodes Furniture.

John E. Bassett III, 62, has been with the Company since 1981 and served in various wood manufacturing and product sourcing capacities, including Vice President, Wood Manufacturing; Vice-President, Global Sourcing from 2001 to 2007 and Vice President, Wood in 2008. He was appointed Senior Vice President, Wood in 2009. In 2019, he was also promoted to the position of Senior Vice President, Chief Operations Officer.

Bruce R. Cohenour, 62, has been with the Company since 2011, starting as Senior Vice President of Upholstery Merchandising. In 2013, he was promoted to Senior Vice President of Sales and Merchandising. In 2019, he was appointed Senior Vice President, Chief Sales Officer. Prior to joining Bassett, Mr. Cohenour was with Hooker Furniture Corp. from 2007 through 2010, last serving as President of the Case Goods Division.

J. Michael Daniel, 59, joined the Company in 2007 as Corporate Controller. From April 2009 through December 2009, he served as Corporate Controller and Interim Chief Financial Officer. In January 2010, he was appointed Vice President and Chief Accounting Officer. In January 2013, he was promoted to Senior Vice President and Chief Financial Officer. In 2019, he was also promoted to the position of Senior Vice President, Chief Financial and Administrative Officer.

Jack L. Hawn, 67, has been with the Company since 2015 as Senior Vice President, Bassett and President, Zenith. His company, Zenith Transportation, Inc., was majority owner of Zenith (Zenith Freight Lines, LLC) from 1999 until its interest in Zenith was acquired by the Company in 2015. He has served as President of Zenith since its formation in 1999.

Jay R. Hervey, Esq., 61, has served as the General Counsel, Vice President and Secretary for the Company since 1997.

Kara Kelchner-Strong, 46, joined the Company in 2007 as Director, Retail Communications. In 2015, she was promoted to Vice President, Strategy and Planning. In 2018, she was appointed Vice President, Strategic Transformation Officer and in 2019, she was promoted to Senior Vice President, Customer Experience Officer. Prior to joining Bassett, she held several positions with Restoration Hardware.

Robert H. Spilman, Jr., 64, has been with the Company since 1984. Since 2000, he has served as Chief Executive Officer and President, and in 2016 also became the Chairman of the Board of Directors.

PART II

Market Information:

Bassett’s common stock trades on the NASDAQ global select market system under the symbol “BSET.” We had approximately 3,400 beneficial stockholders at January 15, 2021.

Issuer Purchases of Equity Securities: 

We are authorized to repurchase Company stock under a plan which was originally announced in 1998. On October 3, 2018, the Board of Directors increased the remaining limit of the repurchase plan to $20 million. The repurchase program does not include a specific time table or price targets and may be suspended or terminated at any time. Shares may be purchased through open market or privately negotiated transactions at the discretion of management based on its evaluation of prevailing market conditions and other factors. The following table summarizes the stock repurchase activity for the three months ended November 28, 2020 and the approximate dollar value of shares that may yet be purchased pursuant to our stock repurchase program:

Issuer Purchases of Equity Securities

(dollar amounts in thousands, except share and per share data)

The selected financial data set forth below for the fiscal years indicated were derived from our audited consolidated financial statements. The information should be read in conjunction with our consolidated financial statements (including the notes thereto) and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” appearing elsewhere in, or incorporated by reference into, this report.

(Amounts in thousands except share and per share data)

Our fiscal year, which ends on the last Saturday of November, periodically results in a 53-week year instead of the normal 52 weeks.  The prior fiscal year ending November 30, 2019 was a 53-week year, with the additional week being included in the first fiscal quarter.  Accordingly, the information presented below includes 53 weeks of operations for the year ended November 30, 2019 as compared to 52 weeks included in the years ended November 28, 2020 and November 24, 2018.

Impact of COVID-19

For a discussion of how COVID-19 has impacted and may continue to impact our business and financial condition, please refer to the discussion under the heading "Impact of the COVID-19 Pandemic Upon Our Business" in Part I, Item 1 of this report.

Overview

Bassett is a leading retailer, manufacturer and marketer of branded home furnishings. Our products are sold primarily through a network of Company-owned and licensee-owned branded stores under the Bassett Home Furnishings (“BHF”) name, with additional distribution through other wholesale channels including multi-line furniture stores, many of which feature Bassett galleries or design centers. We were founded in 1902 and incorporated under the laws of Virginia in 1930. Our rich 118-year history has instilled the principles of quality, value, and integrity in everything we do, while simultaneously providing us with the expertise to respond to ever-changing consumer tastes and meet the demands of a global economy.

With 97 BHF stores at November 28, 2020, we have leveraged our strong brand name in furniture into a network of Company-owned and licensed stores that focus on providing consumers with a friendly environment for buying furniture and accessories.  Our store program is designed to provide a single source home furnishings retail store that provides a unique combination of stylish, quality furniture and accessories with a high level of customer service.  In order to reach markets that cannot be effectively served by our retail store network, we also distribute our products through other wholesale channels including multi-line furniture stores, many of which feature Bassett galleries or design centers. We use a network of over 30 independent sales representatives who have stated geographical territories. These sales representatives are compensated based on a standard commission rate. We believe this blended strategy provides us the greatest ability to effectively distribute our products throughout the United States and ultimately gain market share.  

The BHF stores feature custom order furniture, free in-home or virtual design visits (“home makeovers”) and coordinated decorating accessories.  Our philosophy is based on building strong long-term relationships with each customer.  Sales people are referred to as “Design Consultants” and are trained to evaluate customer needs and provide comprehensive solutions for their home decor.  Until a rigorous training and design certification program is completed, Design Consultants are not authorized to perform in-home or virtual design services for our customers.

We have factories in Newton, North Carolina that manufacture custom upholstered furniture. We also have factories in Martinsville and Bassett, Virginia that assemble and finish our custom dining offerings, including our solid hardwood furniture “Bench Made” line. Our manufacturing team takes great pride in the breadth of its options, the precision of its craftsmanship, and the speed of its manufacturing process. Our logistics team then promptly ships the product to one of our home delivery hubs or to a location specified by our licensees.  In addition to the furniture that we manufacture domestically, we source most of our formal bedroom and dining room furniture (casegoods) and certain leather upholstery offerings from several foreign plants, primarily in Vietnam, Thailand and China. Over 75% of the products we currently sell are manufactured in the United States.

We also own Zenith Freight Lines, LLC (“Zenith”) which provides logistical services to Bassett along with other furniture manufacturers and retailers. Zenith delivers best-of-class shipping and logistical support services that are uniquely tailored to the needs of Bassett and the furniture industry. Approximately 60% of Zenith’s revenue is generated from services provided to non-Bassett customers.

On December 21, 2017, we purchased certain assets and assumed certain liabilities of Lane Venture from Heritage Home Group, LLC for $15,556 in cash. Lane Venture is a manufacturer and distributor of premium outdoor furniture and is now being operated as a component of our wholesale segment. This acquisition marked our entry into the market for outdoor furniture and we believe that Lane Venture has provided a foundation for us to become a significant participant in this category. Our strategy is to distribute this brand outside of our BHF store network only. See Note 3 to our consolidated financial statements for additional details regarding this acquisition.

With the knowledge we have gained through operating Lane Venture, we have developed the Bassett Outdoor brand that is only marketed through the BHF store network. This allows Bassett branded product to move from inside the home to outside the home to capitalize on the growing trend of outdoor living.

At November 28, 2020, our BHF store network included 63 Company-owned stores and 34 licensee-owned stores. During fiscal 2020, we closed seven underperforming Company-owned stores in Burlington and Stoughton, Massachusetts, Newport News, Virginia, Coral Gables and Ft. Lauderdale, Florida, and Torrance and Culver City, California. One new licensee store was opened in Thornton, Colorado.

We consider our website to be the front door to our brand experience where customers can research our furniture and accessory offerings and subsequently buy online or engage with an in-store design consultant. Customer acquisition resulting from our digital outreach strategies increased our traffic to the website by 82% and web orders by 92% for the fourth quarter of 2020 as compared to 2019. Digital advertising dominated our marketing expenditures for the majority of the year as we chose to spend less in traditional television and direct mail advertising. We plan to continue with increased levels of spending on digital advertising and outreach during 2021. We also expect to continue investing in our website to improve the navigation and the ordering capabilities to increase web sales. Much of our current product offerings highlight the breadth and depth of our custom furniture capabilities which are difficult to show and sell online. We plan to expand our merchandising strategies to include more product that can be more easily purchased online with or without a store visit. While we work to increase web sales, we will not compromise on our in-store experience or the quality of our in-home makeover capabilities.

Analysis of Operations

The following discussion provides an analysis of our results of operations and reasons for material changes therein for fiscal year 2020 as compared to fiscal year 2019. See “Analysis of Operations” in Part II, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations in the Company’s 2019 Annual Report on Form 10-K, filed with the SEC on January 23, 2020 for an analysis of the fiscal year 2019 results as compared to fiscal year 2018.

Net sales revenue, cost of furniture and accessories sold, selling, general and administrative (“SG&A”) expense, new store pre-opening costs, other charges, and income from operations were as follows for the years ended November 28, 2020 and November 30, 2019:

Our consolidated net sales by segment were as follows:

*53 weeks for fiscal 2019 as compared with 52 weeks for fiscal 2020.

Refer to the segment information which follows for a discussion of the significant factors and trends affecting our results of operations for fiscal 2020 as compared with fiscal 2019.

Certain other items affecting comparability between periods are discussed below in “Other Items Affecting Net Income”.

Segment Information

As more fully discussed under the heading "Impact of the COVID-19 Pandemic Upon Our Business" in Part I, Item 1 of this report, the COVID-19 pandemic had a severely disruptive and adverse impact upon our business during the second fiscal quarter of 2020 followed by a return to full operations early in the third fiscal quarter. As a result, we do not believe that a comparative analysis of our segment operating results for the full year of fiscal 2020 as compared to fiscal 2019 is, by itself, meaningful with respect to understanding the significant factors and trends affecting our ongoing operations. Therefore, in addition to the full year-over-year comparative data shown below, we have provided additional information comparing our results of operations for each segment for the six months ended November 28, 2020 as compared with the six months ended November 30, 2019, and our analysis is focused primarily on that six month comparative period. For additional discussion and analysis of our operating results during the first half of fiscal 2020, refer to Part I, Item 2 of our Quarterly Report on Form 10-Q for the quarterly period ended May 30, 2020, filed with the SEC on July 9, 2020, as well as Part I, Item 2 of our Quarterly Report on Form 10-Q for the quarterly period ended February 29, 2020, filed with the SEC on April 2, 2020. Note that the six months ended November 28, 2020 and the six months ended November 30, 2019 both contained 26 weeks.

We have strategically aligned our business into three reportable segments as described below:

Wholesale. The wholesale home furnishings segment is involved principally in the design, manufacture, sourcing, sale and distribution of furniture products to a network of Bassett stores (licensee-owned stores and Company-owned stores) and independent furniture retailers. Our wholesale segment includes our wood and upholstery operations as well as all corporate selling, general and administrative expenses, including those corporate expenses related to both Company- and licensee-owned stores. We eliminate the sales between our wholesale and retail segments as well as the imbedded profit in the retail inventory for the consolidated presentation in our financial statements. Our wholesale segment also includes our holdings of short-term investments and retail real estate previously leased as licensee stores. The earnings and costs associated with these assets are included in other loss, net, in our consolidated statements of operations.

Retail – Company-owned stores. Our retail segment consists of Company-owned stores and includes the revenues, expenses, assets and liabilities (including real estate) and capital expenditures directly related to these stores and the Company-owned distribution network utilized to deliver products to our retail customers.

Logistical services. With our acquisition of Zenith on February 2, 2015, we created the logistical services operating segment which reflects the operations of Zenith. In addition to providing shipping and warehousing services for the Company, the revenue from which is eliminated upon consolidation, Zenith also provides similar services to other customers, primarily in the furniture industry. Revenue from the performance of these services to other customers is included in logistics revenue in our consolidated statement of operations. Zenith’s operating costs are included in selling, general and administrative expenses.

The following tables illustrate the effects of various intercompany eliminations on income (loss) from operations in the consolidation of our segment results for the full fiscal years ended November 28, 2020 and November 30, 2019:

The following tables illustrate the effects of various intercompany eliminations on income (loss) from operations in the consolidation of our segment results for the six months ended November 28, 2020 and November 30, 2019:

The following table reconciles income from operations as shown above for our consolidated segment results with income (loss) from operations as reported in accordance with GAAP for the full fiscal years and six months ended November 28, 2020 and November 30, 2019:

Asset Impairment Charges

During fiscal 2020 the loss from operations included $11,114 of non-cash asset impairment charges on five underperforming retail stores, including $6,239 for the impairment of operating lease right-of-use assets, and $1,070 of non-cash impairment charges in our wholesale segment, primarily due to the closure of our custom upholstery manufacturing facility in Grand Prairie, Texas.

During fiscal 2019 the loss from operations included $4,431 of non-cash impairment charges recognized on the assets of six underperforming retail stores.

Goodwill Impairment Charges

Due to the impact of the COVID-19 pandemic, we performed an interim impairment assessment of our goodwill as of May 30, 2020. As a result, we recognized a non-cash charge of $1,971 during fiscal 2020 for the impairment of goodwill associated with our wood reporting unit within our wholesale segment (see Note 6 to our Consolidated Financial Statements).

During fiscal 2019 our annual evaluation of the carrying value of our recorded goodwill resulted in the recognition of a $1,926 non-cash charge for the impairment of goodwill associated with our retail reporting unit (see Note 6 to our Consolidated Financial Statements).

Early Retirement Program

During the first quarter of fiscal 2019, we offered a voluntary early retirement package to certain eligible employees of the Company. These employees received pay equal to one-half their current salary plus benefits over a period of one year from the final day of each individual’s active employment. Accordingly, we recognized a charge of $835 during the year ended November 30, 2019.

Litigation Expense 

During fiscal 2020 and 2019 we accrued $1,050 and $700, respectively for the estimated costs to resolve certain wage and hour violation claims that had been asserted against the Company.

Lease Exit Costs

During fiscal 2019 we recognized a $149 charge for lease exit costs incurred in connection with the repositioning of a Company-owned retail store in Palm Beach, Florida to a new location within the same market.

Wholesale Segment

Net sales, gross profit, SG&A expense and operating income for our Wholesale Segment were as follows for the full fiscal years and last six months ended November 28, 2020 and November 30, 2019:

Wholesale shipments by category for the full fiscal years and last six months ended November 28, 2020 and November 30, 2019 are summarized below:

*53 weeks for fiscal 2019 as compared with 52 weeks for fiscal 2020.

Fiscal 2020 as Compared to Fiscal 2019

Net sales for the year ended November 28, 2020 declined $40,030 or 15.3% as compared to the year ended November 30, 2019 due primarily to COVID-related operational disruptions which occurred during the second quarter of fiscal 2020, during which we recorded a 48% decrease in net sales as compared to the second quarter of fiscal 2019 and an operating loss of $7,381 for the period. Gross margins during the second quarter of fiscal 2020 were impacted by reduced leverage of fixed costs due to the temporary shutdown of operations coupled with increased inventory valuation reserves. Although SG&A expenses were reduced during the second quarter, the results were also impacted by reduced leverage from significantly lower sales.

Six Months Ended November 28, 2020 as Compared to the Six Months Ended November 30, 2019

Net sales for the six months ended November 28, 2020 as compared to the six months ended November 30, 2019 decreased $2,263 or 1.8%. Wholesale orders for the six-month period of 2020 increased 26% as compared to the comparable period in 2019 resulting in a wholesale backlog of $54,874 at November 28, 2020 as compared to $19,953 at November 30, 2019. Wholesale orders from independent dealers increased 62% for the last six months of 2020 as compared to the prior year period driven by increases from existing dealers along with an expansion of the dealer base. In addition, orders from the BHF store network increased 7.3% while Lane Venture orders increased by 38%. Gross margins for the six months of 2020 as compared to the comparable period in 2019 decreased by 20 basis points as decreases in the imported wood line due to the continued process of lowering inventory levels and reducing overall import wood offerings were almost offset by improved gross margins in both the wood and upholstery manufacturing operations. SG&A costs for the six months of 2020 as compared to 2019 decreased 450 basis points due to lower marketing and promotional spending and bad debt expense, partially offset by increased incentive compensation.    

Retail Segment – Company Owned Stores

Net sales, gross profit, SG&A expense, new store pre-opening costs and operating income for our retail segment were as follows for the full fiscal years and last six months ended November 30, 2019 and November 24, 2018:

*53 weeks for fiscal 2019 as compared with 52 weeks for fiscal 2020.

Fiscal 2020 as Compared to Fiscal 2019

Net sales for the year ended November 28, 2020 declined $56,749 or 21.1% as compared to the year ended November 30, 2019 due primarily to COVID-related operational disruptions during the second quarter of 2020, during which where we recorded a 47% decrease in net sales as compared to the second quarter of 2019 and an operating loss of $9,170 for the period. Gross margins during the second quarter were impacted by increased inventory valuation reserves as we began a process to simplify our product offerings to make them more web friendly which resulted in increased clearance sales over the last six months of 2020. Although SG&A expenses were reduced during the second quarter, results were also impacted by reduced leverage from significantly lower sales.

Six Months Ended November 28, 2020 as Compared to the Six Months Ended November 30, 2019

Net sales for the six months ended November 28, 2020 as compared to the six months ended November 30, 2019 decreased $23,569 or 17%. Written sales, the value of sales orders taken, but not delivered, increased 3.6% for the six-month period in 2020 as compared to the comparable period in 2019 resulting in a retail backlog of $57,041 at November 28, 2020 as compared to $31,146 at November 30, 2019 in spite of there being seven fewer stores by the end of fiscal 2020. As previously discussed, Bassett and most of the home furnishings industry has been faced with continuing logistical challenges from COVID-related labor shortages and supply chain disruptions creating significant delays in order fulfillment and increasing backlogs. Gross margins for the six months of 2020 as compared to the comparable period in 2019 decreased by 210 basis points due to the increased clearance sales as discussed above. SG&A costs for the last six months of fiscal 2020 as compared to 2019 decreased 340 basis points due to lower marketing and promotional spending, decreased compensation costs due to permanent workforce reductions and lower travel costs partially offset by decreased leverage of fixed costs from lower sales volumes. SG&A expenses were also reduced by a non-cash gain of $1,160 resulting from the termination of a lease for a store closed during the six months ended November 28, 2020.

Logistical Services Segment

Revenues, operating expenses and income from operations for our logistical services segment were as follows for the full fiscal years and last six months ended November 28, 2020 and November 30, 2019:

*53 weeks for fiscal 2019 as compared with 52 weeks for fiscal 2020.

Fiscal 2020 as Compared to Fiscal 2019

Net revenues for the year ended November 28, 2020 declined $4,916 or 6.1% as compared to the year ended November 30, 2019 due primarily to COVID-related operational disruptions during the second quarter of fiscal 2020, during which we experienced a 24% decrease in net revenues as compared to the second quarter of 2019 and incurred an operating loss of $1,842 for the period.

Six Months Ended November 28, 2020 as Compared to the Six Months Ended November 30, 2019

Net revenues for the six months ended November 28, 2020 as compared to the six months ended November 30, 2019 increased $354 or 0.9%. Operating income increased $1,361 for the last six months of fiscal 2020 as compared to the comparable period in 2019 primarily due to improved fleet costs driven by lower fuel prices and increased demand for over the road trucking partially offset by higher warehousing labor costs as Zenith has been challenged to find and maintain freight-handling personnel in its warehousing operation due to the previously discussed COVID-related labor shortages.

Other Items Affecting Net Income (Loss)

Other items affecting net loss for fiscal 2020 and 2019 are as follows:

Provision for Income taxes

On March 27, 2020 the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) was signed into law. A major provision of the CARES Act allows net operating losses from the 2018, 2019 and 2020 tax years to be carried back up to five years. As a result, for the year ended November 28, 2020, we were able to recognize tax benefits substantially in excess of the current federal statutory rate of 21% due to the effects of carrying back our current net operating loss to tax years in which the federal statutory rate was 35%.

We recorded an income tax provision (benefit) of $(6,365), $188 and $3,988 in fiscal 2020, 2019 and 2018, respectively. Our effective tax rate of 37.9% differs from the federal statutory rate of 21.0% primarily due to the benefit of the CARES Act and to the effects of state income taxes and various permanent differences, including those related to the non-deductible goodwill impairment charge. Our effective tax rate of (10.8%) for 2019 differs from the federal statutory rate of 21.0% primarily due to the non-deductible goodwill impairment charge. Other items affecting the rate include the effects of state income taxes and certain other non-deductible expense. See Note 13 to the Consolidated Financial Statements for additional information regarding our income tax provision (benefit), as well as our net deferred tax assets and other matters.

We have net deferred tax assets of $4,468 as of November 28, 2020, which, upon utilization, are expected to reduce our cash outlays for income taxes in future years. It will require approximately $17,000 of future taxable income to utilize our net deferred tax assets.

Liquidity and Capital Resources

We are committed to maintaining a strong balance sheet in order to weather difficult industry conditions, to allow us to take advantage of opportunities as market conditions improve, and to execute our long-term retail strategies.

Cash Flows

Cash provided by operations for fiscal 2020 was $36,675 compared to $9,809 for fiscal 2019, representing an increase in cash provided by operations of $26,866. This increase in operating cash flow is primarily due to a substantial increase in customer deposits taken against unfilled orders, decreased investment in inventory as there were no store openings in fiscal 2020, other changes in working capital due in part to the timing impact of the additional week in the prior year period, improved operations in our retail segment, and cash conservation measures implemented in the second and third quarters of fiscal 2020 in response to the impact of COVID-19.

Our overall cash position increased by $26,112 during fiscal 2020, compared to an overall decrease of $13,781 during fiscal 2019, an improvement of $39,893 over the prior year. In addition to the improvement in cash flows from operations, cash used in investing activities was $3,747 for fiscal 2020 as compared to $11,173 used in the prior year, a net decrease of $7,426. This decrease was primarily due to lower capital expenditures in the current year and proceeds from the sale of our closed Gulfport store location in fiscal 2020, partially offset by lower proceeds from the maturity of investments in CDs as compared to the prior year. Net cash used in financing activities was $6,816 for fiscal 2020 compared to $12,417 used in fiscal 2019, a decrease of $5,601. This decrease is primarily due to lower repurchases of our stock primarily in response to COVID-19. Share repurchases totaled $2,208 during fiscal 2020 as compared to $7,345 repurchased during fiscal 2019. As of November 28, 2020, $8,431 remains authorized under our existing share repurchase plan. With cash and cash equivalents and short-term investments totaling $63,514 on hand at November 28, 2020, expected future operating cash flows and the availability under our credit line noted below, we believe we have sufficient liquidity to fund operations for the foreseeable future.

Debt and Other Obligations

Our bank credit facility, which was amended effective June 15, 2020, provided for a line of credit of up to $50,000 through December 31, 2020, after which date the maximum availability was reduced to $25,000. At November 28, 2020, we had $2,881 outstanding under standby letters of credit against our line, leaving availability under our credit line of $47,119. In addition, at November 28, 2020 we had outstanding standby letters of credit with another bank totaling $325. The line bears interest at the rate of LIBOR plus 1.9%, with a fee of 0.25% charged for the unused portion of the line, and is secured by a general lien on our accounts receivable and inventory. Under the terms of the June 15, 2020 amendment, all covenants based on financial ratios were waived for fiscal 2020. We currently expect to be in compliance with these covenants, which include a minimum fixed charge coverage ratio and a maximum debt to tangible net worth ratio, through the end of fiscal 2021. The credit facility matures on January 31, 2022.

We lease land and buildings that are used in the operation of our Company-owned retail stores as well as in the operation of certain of our licensee-owned stores, and we lease land and buildings at various locations throughout the continental United States for warehousing and distribution hubs used in our logistical services segment. We also lease tractors, trailers and local delivery trucks used in our logistical services and retail segments. The total future minimum lease payments for leases with terms in excess of one year at November 28, 2020 is $165,117, the present value of which is $141,856 and is included in our accompanying consolidated balance sheet at November 28, 2020. We negotiated with a number of our landlords to obtain relief in the form of rent deferrals or abatements of rent as a result of the effects of COVID-19 on our business. At November 28, 2020, the remaining deferred rent was $1,027 which primarily represents rent deferred to fiscal 2021. We were contingently liable under licensee lease obligation guarantees in the amount of $1,811 at November 28, 2020. Remaining terms under these lease guarantees range from approximately one to five years. See Note 15 to our condensed consolidated financial statements for additional details regarding our leases and lease guarantees.

Dividends and Share Repurchases

During fiscal 2020, we declared and paid four quarterly dividends totaling $4,545, or $0.455 per share. During fiscal 2020, we repurchased 202,711 shares of our stock for $2,208 under our share repurchase program. The weighted-average effect of these share repurchases on both our basic and diluted loss per share was approximately $0.01 per share. The approximate dollar value that may yet be purchased pursuant to our stock repurchase program as of November 28, 2020 was $8,431.

Capital Expenditures

We currently anticipate that total capital expenditures for fiscal 2021 will be approximately $16 to $18 million which will be used primarily for additional tractors for our logistical services segment, additional investments in technology and various remodels or updates to our existing store fleet. Our capital expenditure and working capital requirements in the foreseeable future may change depending on many factors, including but not limited to the overall performance of the store program, our rate of growth, our operating results and any adjustments in our operating plan needed in response to industry conditions, competition or unexpected events. We believe that our existing cash, together with cash from operations, will be sufficient to meet our capital expenditure and working capital requirements for the foreseeable future.

Fair Value Measurements

We account for items measured at fair value in accordance with ASC Topic 820, Fair Value Measurements and Disclosures. ASC 820’s valuation techniques are based on observable and unobservable inputs. Observable inputs reflect readily obtainable data from independent sources, while unobservable inputs reflect our market assumptions. ASC 820 classifies these inputs into the following hierarchy:

Level 1 Inputs– Quoted prices for identical instruments in active markets.

Level 2 Inputs– Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations whose inputs are observable or whose significant value drivers are observable.

Level 3 Inputs– Instruments with primarily unobservable value drivers.

We believe that the carrying amounts of our current assets and current liabilities approximate fair value due to the short-term nature of these items. Our primary non-recurring fair value estimates, typically involving the valuation of business acquisitions (see Note 3 to the Consolidated Financial Statements), goodwill impairments (see Note 8 to the Consolidated Financial Statements) and asset impairments (see Note 14 to the Consolidated Financial Statements) have utilized Level 3 inputs.

Contractual Obligations and Commitments

We enter into contractual obligations and commercial commitments in the ordinary course of business (See Note 15 to the Consolidated Financial Statements for a further discussion of these obligations). The following table summarizes our contractual payment obligations and other commercial commitments and the fiscal year in which they are expected to be paid.